Also known as: fair cash values · fair market value
Written by attorneys — see sources below.
The price which would result from negotiation and mutual agreement, after ample time to find a purchaser, between a vendor who is willing, but not compelled to sell, and a purchaser who is willing to buy, but not compelled to take a particular piece of real estate.
Farah Fox held a lease on commercial space from Frostline Textiles. After the landlord breached repair obligations, Farah terminated the lease and vacated. A court calculated her damages to include the fair cash value of the lease on the termination date.
Fernando Farrell was appointed personal representative of his aunt's estate containing farmland and equipment. Within three months he prepared an inventory listing each asset with reasonable detail and stating its fair cash value as of the date of death along with any encumbrances.
Finn Fletcher and other minority shareholders in a closely held company received a cash-out merger offer from the controlling group. The court required the offer price to reflect the fair cash value of the shares based on the company's assets and earning power.
June K. Jones owned 25 shares of the capital stock of United Savings and Loan Association of California and brought this action individually and on behalf of all similarly situated minority stockholders against United Financial Corporation of California, fifteen individuals, and four corporations who were present or former stockholders or officers of the Association. The Association, a California-chartered savings and loan association, first issued 6,568 shares of stock on April 5, 1956. Of these shares, 987 were purchased by depositors including Jones pursuant to warrants issued in proportion to their deposits, while the remaining shares allocated to unexercised warrants were sold to the then chairman of the board and later resold to defendants and others. No additional stock was issued after that date. Prior to 1959, fourteen of the nineteen defendants comprised 95 percent of the market for Association shares. The shares were not actively traded owing to their high book value, the closely held nature of the Association, and the failure of management to provide investment information or assistance. In 1958 investor interest in savings and loan stocks increased, but Association shares did not participate in the resulting price rise. On May 8, 1959, defendants incorporated United Financial Corporation of California in Delaware. On May 14, 1959, pursuant to a prior agreement, Association stockholders who among them owned a majority of the Association stock exchanged their shares for those of United Financial, receiving a “derived block” of 250 United Financial shares for each Association share. After the exchange, United Financial held 85 percent of the outstanding Association stock. Minority stockholders were not offered an opportunity to participate in the exchange. United Financial's first public offering of 60,000 units, each consisting of two shares and one $100 subordinated convertible debenture, occurred in June 1960 and produced a $6,200,000 return of capital distributed to the original United Financial shareholders. A second public offering of 50,000 additional shares plus 600,000 derived shares by the original investors took place in February 1961. Shortly after the first public offering, United Financial offered to purchase up to 350 Association shares at $1,100 per share when book value was $1,411.57 and earnings were $301.15 per share. In December 1960 the Association president notified minority stockholders that no dividends other than the regular $4 annual dividend would be paid in the near future. Defendants then proposed an exchange of United Financial shares for Association stock. Under this proposal each minority stockholder would have received approximately 51 United Financial shares of a total value of $2,400 for each Association share. When the application for a permit was filed with the California Corporations Commissioner on August 28, 1961, the value of the derived blocks of United Financial shares received by defendants in the initial exchange had risen to approximately $8,800. At the hearings held on the application by the Commissioner, representatives of United Financial justified the higher valuation of United Financial shares on the ground that they were highly marketable, whereas Association stock was unmarketable and poor collateral for loans. Plaintiff and other minority stockholders objected to the proposed exchange, contending that the plan was not fair, just, and equitable. Defendants then asked the Commissioner to abandon the application without ruling on it. Plaintiff commenced this action on January 30, 1962. The trial court sustained defendants' general and special demurrers to the third amended complaint without leave to amend and entered judgment for defendants; plaintiff appealed and defendants filed a protective cross-appeal.
View caseFelicity French inherited property subject to a mortgage and later sold it. The IRS computed her basis by including the full amount of the mortgage debt because fair cash value at acquisition had equaled the debt plus her equity.
Crane was the sole beneficiary and the executrix of the will of her husband, who died January 11, 1932. He then owned an apartment building and lot subject to a mortgage which secured a principal debt of $255,000.00 and interest in default of $7,042.50. As of that date, the property was appraised for federal estate tax purposes at a value exactly equal to the total amount of this encumbrance. Shortly after her husband's death, Crane entered into an agreement with the mortgagee whereby she was to continue to operate the property, collecting the rents, paying for necessary repairs, labor, and other operating expenses, and reserving $200.00 monthly for taxes, and was to remit the net rentals to the mortgagee. This plan was followed for nearly seven years, during which period Crane reported the gross rentals as income and claimed and was allowed deductions for taxes and operating expenses paid on the property, for interest paid on the mortgage, and for the physical exhaustion of the building. Meanwhile, the arrearage of interest increased to $15,857.71. On November 29, 1938, with the mortgagee threatening foreclosure, Crane sold to a third party for $3,000.00 cash, subject to the mortgage, and paid $500.00 expenses of sale. Crane reported a taxable gain of $1,250.00 on the theory that the property acquired and sold was only the equity with a zero basis, so that the amount realized was the net cash of $2,500.00. The Commissioner determined that Crane realized a net taxable gain of $23,767.03 on the theory that the property was the physical property itself with an original basis of $262,042.50, adjusted for $28,045.10 in depreciation, and that the amount realized included the $255,000.00 mortgage principal. The Tax Court agreed with the Commissioner that the building was not a capital asset but otherwise adopted Crane's contentions and expunged the deficiency. On the Commissioner's appeal, the Circuit Court of Appeals reversed. The Supreme Court granted certiorari because of the importance of the questions raised as to the proper construction of the gain and loss provisions of the Internal Revenue Code.
View caseFrank Fisher, a shareholder, challenged a short-form merger alleging inadequate disclosures. The court measured the fairness of the cash price against the fair cash value of the shares determined by independent appraisal methods.
In 1936 Santa Fe Industries, Inc. acquired control of 60 percent of the stock of Kirby Lumber Corp., a Delaware corporation. Through a series of purchases between 1968 and 1973 Santa Fe raised its ownership to 95 percent at prices ranging from $65 to $92.50 per share. In 1974 Santa Fe decided to obtain 100 percent ownership. It invoked Delaware's short-form merger statute. The statute allows a parent owning at least 90 percent of a subsidiary to merge upon board approval and pay cash to the remaining shareholders without their consent or advance notice. Santa Fe obtained independent appraisals valuing Kirby's physical assets at $320 million, or $640 per share. It retained Morgan Stanley & Co. to appraise the stock. Morgan Stanley valued the shares at $125 each. Santa Fe offered the minority $150 per share. The merger became effective on July 31, 1974. The minority received notice within ten days together with an information statement containing the asset appraisals, Morgan Stanley's valuation, and other financial data. The information statement advised minority shareholders of their statutory right to petition the Delaware Court of Chancery for an appraisal of fair value. Respondents, minority stockholders of Kirby, filed a petition for appraisal on August 21, 1974. They withdrew it on September 9. The next day they commenced this federal action on behalf of the corporation and other minority shareholders. The amended complaint alleged that Kirby stock was worth at least $772 per share based on the pro rata value of physical assets. It alleged that the merger lacked any justifiable business purpose. It alleged that the merger occurred without prior notice. It alleged that Santa Fe obtained a fraudulent appraisal from Morgan Stanley to lull minority shareholders into accepting an inadequate price. The complaint asserted that this conduct violated Rule 10b-5 by employing a device, scheme, or artifice to defraud and by engaging in an act or practice that operated as a fraud or deceit in connection with the purchase or sale of securities. The District Court for the Southern District of New York dismissed the complaint for failure to state a claim. The Court of Appeals for the Second Circuit reversed. The Supreme Court granted certiorari.
View caseFloyd Franklin relied on Red Owl's repeated assurances and incurred expenses preparing to open a franchise. When the deal collapsed, the court awarded damages measured by the fair cash value of the lost opportunity to operate the store.
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View caseFair cash value is the price a willing buyer and willing seller would agree upon after ample marketing time. The court may offset the deficiency by the amount that fair cash value exceeds the foreclosure sale price after subtracting senior liens. This prevents the mortgagee from obtaining a windfall by purchasing at a depressed price and reselling at a profit.
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The representative must list each asset with reasonable detail and state its fair cash value as of the date of the decedent's death. Encumbrances must also be noted for each item. The inventory must be prepared within three months after appointment and provided to interested persons upon request.
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Damages may include the fair cash value of the lease on the termination date. This measures the economic loss from losing the leasehold interest. The tenant may also recover reasonable relocation costs and other foreseeable losses without double recovery.
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…the city has “taken” their right to this superjacent airspace, thus entitling them to “just compensation” measured by the fair market value of these air rights. Apart from our own disagreement with appellants’ characterization of the effect of the New York City law, see infra , at 134-135, the submission that appellants may…